Do I Need Good Credit if I Never Plan to Borrow Money?
by Maurie Backman | Updated July 21, 2021 - First published on Feb. 2, 2020
The quick answer? Yes.
Having good credit can help in many aspects of life. If you're looking to buy a home, it can help you qualify for a mortgage with a favorable rate. If you're applying for a new credit card, it can help you land a great cash-back offer. And if you're in need of a car, it can help you score an affordable auto loan.
But what if you have no intention of borrowing money? What if you're a college grad who will be moving back home for the foreseeable future, a homeowner with a paid-off house, or a city dweller who doesn't need a car? And what if you make it a habit not to use credit cards and as such, don't expect to apply for one anytime soon? Do you still need good credit?
The answer, unequivocally, is yes.
Why your credit matters
While it's true that good credit comes in particularly handy when you need to borrow money in some shape or form, that's not the only situation where it could come into play. Imagine you're looking to rent an apartment. Though you're not asking to borrow money -- if anything, you're asking to pay someone money -- your landlord will most likely perform a thorough screening before agreeing to rent to you. And that includes running your credit history. If your credit record or score is poor, then you could lose out on the home you're hoping to live in.
Another thing: Your credit could, in some cases, impact your ability to get hired at a job. Though employers can't check your actual credit score, they can check your credit report to make sure there are no red flags. And if an employer doesn't like what it sees, you could lose out on a job offer -- especially if the work in question requires you to manage money in any way. Even if you're applying to a non-financial job, remember that your credit record is a reflection of how responsible you are, and if it's not in good shape, it sends the message that you may not be the most trustworthy person to hire.
If your credit isn't good, you may also be required to fork over a security deposit when you sign up for utilities or attempt to get on a cell phone plan. Similarly, you may have trouble getting a favorable rate on auto insurance if your credit is poor.
Improving your credit
If your credit isn't in good shape, a few simple moves on your part could help it improve relatively quickly. First, check your credit reports for errors. You can request a free copy annually from each of the three major credit bureaus -- Experian, Equifax, and TransUnion. If you spot errors on your report, which has been known to happen, and get them corrected, that alone could boost your credit. The same holds true if you make a habit of paying all incoming bills on time, and work on paying down a chunk of your existing revolving debt (such as credit card debt).
Remember, too, that while you may not have any plans to borrow money in the near future, you never know when circumstances might change. You might need a loan to cover an unplanned expense, decide to buy a home, or move someplace where having a car is a must. And so the better your credit, the more financial flexibility you'll buy yourself.
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